Redistribution economics in extremis

A thought experiment.

In 2006, 1,400 Vermonters reported earning over $500,000, according to the Vermont Tax Department.  Suppose we took all of their income--all $2 billion of it--and gave it to the 205,000 Vermont tax payers who reported earning an income of under $50,000.  This is what the "livable wage" advocates  claim  is a livable wage in Vermont.  Unless they think that resources (read that as money) grows on trees, the only way to give everyone that level of income is take it from someone else, either directly through the tax system or indirectly by mandating a $25 per hour wage.

That would give each of those taxpayers an extra  $10,000.  A significant of money, but not a huge amount.  And you could only do it once.  No one who earns over $500,000  would ever want to earn that much again, at least not in Vermont.  Redistributing income is not a good way to solve poverty.  Growing the economic pie is.

Comments

[Jon Harrison]

An excellent point is made here. Even if we posit that 25 bucks an hour is the minimum "living wage" required in Vermont, the ONLY way to possibly get there is by unleashing capitalism. Redistributionist schemes don't work. It's one thing to favor the federal earned-income tax credit; it's a super-quantum leap to think you can tax the rich to increase permanently the living standard of the poor. Any attempt to do so would be the final blow to Vermont's economy.

[Dennis Lukas]

As a businessman I get to talk to a lot of people and I read many of the blogs. There is to much talk and no action! Baby steps and bandaids are not going to fix the problems.This year Vermonters will have less disposable income due to more increases in fuel costs, food is rising because of shipping and BIO FUEL production,add increased shipping to the cost for goods and this means less money going to local businesses. As Montpelier debates and eats thier meals paid for by the taxpayers, they will tax the wealthy and business to make up for revenue short falls, it makes good sense in there minds. They don't want to offend any one buy cutting budgets.Mean while the debates go on and the salamanders will get new crossings.
The cost of living in Vermont is higher than metro New York were the average household income is $80,000.00 per year.How is this? A good debate for next year.
My business has decreased for the last 18 months,and in that time 75% of my work came from New Hampshire.The wealthy and businesses will bear the tax burden as debates go on.
Baby steps will not keep people or businesses in this state, life is to short.Vermonts economic engine is running on one cyclinder fueled by debate.